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Weekly Market Update – April 29, 2016

The Dow was down 57 points on Friday after a series of poor economic data and unimpressive earnings. For the week the Dow is down 1.3% but year-to-date the index is still up 2.0%.

This week’s economic data were unimpressive as most indicators showed signs of slowing down or missed consensus estimates.  To start the week, new home sales data of 511,000 in March reflected a slowdown from February’s 519,000.  Later in the week, the Conference Board’s index of consumer confidence fell in comparison with March levels. Q1 GDP also did not signal confidence as the .5% annualized growth was the slowest expansion since Q1’14 and a significant slowdown from Q4. Reported earnings for Q1 so far have been lackluster with the blended EPS growth rate being a negative 7.5%. However, jobless claims continued to impress as they remained at multi-year low levels.

The Fed’s decision this week to keep interest rates unchanged did little to change the trajectory of stocks.  However, the news led to strong price performance for bonds and preferreds as the ten-year Treasury rates declined 5 basis points for the week. The Fed mentioned they would continue to “closely monitor inflation indicators and global economic and financial developments”. As a result, expectations for an interest rate hike in June have now diminished as a survey by CNBC highlighted that 19% of analyst expect a hike compared to 32% before the Fed meeting.

Crude oil surged 5% for the week, ending at $46 per barrel. Despite the fallout from the OPEC + others Doha meeting, crude has benefited from a weaker dollar, production outages in some regions, and falling output in the US. In addition, API inventory data showed a decline of 1.1 million barrels in crude inventory levels, compared to expectations of a 2.4 million barrel increase. However, as of Friday, crude started pulling back due to concerns of stronger future production induced by the recent surge in prices.

Next week’s economic calendar highlights include ISM Manufacturing index (May 2), EIA Petroleum Status Report (May 4), and Jobless Claims (May 5). Corporate earnings reports for Q1 will continue.

Have a good weekend,

Natalie Do

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Ulland Investment Advisors

4550 IDS Center · Eighty South Eighth Street · Minneapolis MN 55402 · Telephone: 612-312-1400 · Facsimile: 612-204-3464